NEW DELHI: With Donald Trump doubling US tariffs on Indian goods to 50 per cent, the government has drawn up a four-pronged plan to soften the blow to manufacturing, exports, and jobs.
The steep hike in US tariffs puts India at a significant cost disadvantage, as most competing Asian nations face US tariffs in the 19–30 per cent range on similar products.
While officials explore long-term competitiveness measures, industry leaders are pressing for immediate relief – including targeted subsidies – to prevent permanent loss of market share. Executives warn that without swift intervention, the damage could be difficult to reverse.
Four broad strategies
Sources said the plan under discussion includes: Diversifying export markets away from the US towards Europe, West Asia, and Africa;rebalancing the export basket to reduce dependence on vulnerable sectors; boosting domestic demand to offset lost export volumes and accelerating ease-of-doing-business reforms to lower operational costs.
Industry’s concerns
Exporters say these measures, while sound in principle, fail to address the immediate competitiveness gap created by the tariff shock.
Market diversification, for example, is unlikely to yield quick results as China has already pushed subsidised goods into many alternative markets, undercutting prices in textiles and garments. Bangladesh and other Asian rivals also enjoy a cost edge.
Altering the export basket is a slow, resource-intensive process, requiring global demand shifts and domestic capability building. India’s export profile has remained largely unchanged for over a decade, with engineering goods, petroleum, pharma, electronics, textiles, chemicals, and gems & jewellery dominating.
Stimulating domestic demand could help, but industry warns it cannot replace export competitiveness and may lead to protectionist pressures that invite retaliation. Meaningful boosts to consumption — such as GST cuts on consumer goods – would also dent government revenues.
Ease-of-doing-business reforms, while essential, cannot bridge the 5–25 per cent cost gap created by higher tariffs. Even aggressive implementation would only bring India to where China and Vietnam were years ago.
Competitors’ playbook
Industry executives point out that China is aggressively shielding its exporters through free land, near-zero interest loans, subsidised infrastructure, and hidden incentives.
Without comparable support, Indian firms in vulnerable sectors such as textiles, garments, and electronics risk losing their foothold in key markets.
There are also fears of wider US trade action. A pending Section 232 probe could impose 100 per cent tariffs on semiconductors unless manufacturing shifts to the US, potentially hitting India’s currently duty-free electronics exports.
The broader worry within India Inc is that without targeted support – akin to the earlier Merchandise Exports from India Scheme (MEIS) – parts of the country’s manufacturing and export supply chain may migrate to other countries. Such a shift could have long-lasting consequences for jobs, investments, and industrial capacity.
